Business Context and Reporting Period
This Form 8-K Current Report, filed on March 15, 2017, details material definitive agreements entered into by Spire Inc. and its subsidiary, Laclede Gas Company. The filing reports on debt issuance activities completed or initiated in mid-March 2017.
Key Financial Metrics and Debt Issuance
Spire Inc. Senior Notes
- Amount: $100 million aggregate principal.
- Instrument: 3.93% Senior Notes due March 15, 2027.
- Interest: Payable semi-annually on March 15 and September 15.
- Security Status: Senior unsecured obligations.
- Use of Proceeds: General corporate purposes.
- Covenants: Includes a financial covenant limiting consolidated debt to 70% of consolidated capitalization.
Laclede Gas Company First Mortgage Bonds
- Total Amount: $170 million aggregate principal.
- Structure:
- $50 million First Mortgage Bonds due September 15, 2032 (Interest: 3.58% - 3.68%).
- $70 million First Mortgage Bonds due September 15, 2047 (Interest: 4.17% - 4.23%).
- $50 million First Mortgage Bonds due September 15, 2057 (Interest: 4.32% - 4.38%).
- Security Status: Secured by a Mortgage and Deed of Trust; ranks equal with other first mortgage bonds.
- Use of Proceeds: Refinance existing indebtedness and general corporate purposes.
- Closing Date: Expected no later than September 15, 2017.
Material Changes and Agreements
The primary material change is the expansion of the companies' debt portfolios through private placements exempt from registration under the Securities Act of 1933. Spire Inc. completed its issuance on March 15, 2017, while Laclede Gas Company executed its Bond Purchase Agreement on March 20, 2017, with a closing scheduled for later in the year.
Guidance, Risks, and Unusual Items
Prepayment and Redemption Terms
Both issuers include "make-whole" provisions for early prepayment. The make-whole amount is calculated as the excess of the discounted value of remaining payments over the principal amount, using a discount factor of 0.50% over the yield to maturity of comparable U.S. Treasury securities. Partial prepayments are permitted in amounts not less than 5% of the outstanding principal.
Laclede Gas Bonds may be redeemed at 100% of principal beginning June 15, 2032 (2032 Bonds), March 15, 2047 (2047 Bonds), and March 15, 2057 (2057 Bonds).
Covenants and Restrictions
Agreements contain customary affirmative and negative covenants, including limitations on acquisitions, investments, liens, and sales of property. Laclede Gas is subject to restrictions on dividend payments and other restricted payments. Events of default include payment defaults, covenant breaches, bankruptcy, and cross-defaults to other indebtedness exceeding $25 million.
Investor Verification Checklist
- Verify the final closing date and interest rates for Laclede Gas Bonds, which are subject to market conditions at closing.
- Confirm Spire Inc.'s compliance with the new 70% consolidated debt-to-capitalization covenant.
- Review the specific terms of the "make-whole" calculation to assess refinancing costs if interest rates decline.
- Assess the impact of the $170 million Laclede Gas issuance on the subsidiary's existing debt structure and liquidity.